Supreme Court reins in practice of seizing defendants' assets

In a 5-3 decision, the high court sided with a Miami woman accused of Medicare fraud who said federal prosecutors rendered her unable to hire a lawyer of her choice when they seized $40 million of her assets.

The US Supreme Court struck a blow on Wednesday against a government practice of seizing the financial assets of people accused of crimes, even if the money has no connection to criminal charges.

Criminal defendants had argued that the process of freezing their assets before they had been convicted harmed their ability to pay for a legal defense.

In a 5-to-3 ruling, the high court ruled that federal prosecutors had violated the constitutional rights of a Miami woman accused of Medicare fraud when they froze more than $40 million in assets, including money that wasn’t related to the criminal charges.

Sila Luis had argued that the forfeiture prohibited her from hiring the lawyer of her choice with “untainted” money. As the president of two healthcare companies, she was indicted in 2012 on charges that she and others had defrauded Medicare of $45 million over six years.

Investigators said the scheme involved bribes and kickbacks paid to prospective patients who agreed to sign up for home healthcare they did not need or never received. Some of the funds were later transferred to Mexico, while other money was used to buy properties, expensive cars, and jewelry.

But Ms. Luis argued that since her own net worth was far less than $45 million, the asset freeze left her effectively broke and unable to hire a lawyer for her defense.

Writing for four members of the court, Justice Stephen Breyer agreed, saying that the Sixth Amendment guarantees a fundamental right for defendants to be represented by a lawyer they can afford to hire.

“The government would undermine the value of that right by taking from Luis the ability to use the funds she needs to pay for her chosen attorney,” he wrote in an opinion joined by Chief Justice John Roberts and Justices Ruth Bader Ginsburg and Sonia Sotomayor.

Federal prosecutors have long used forfeiture laws to seize assets related to a crime, such as property linked to organized crime or drug deals.

“The issue is significant because the government is increasingly using forfeiture as a potent weapon to ensure – literally – that crime doesn’t pay. For example, in a 15-month period in 2012 and 2013, the Justice Department seized $1.5 billion and returned those assets to 400,000 crime victims, including to the US Treasury,” the Monitor’s Warren Richey wrote last year.

But the practice of using civil forfeiture statutes to freeze assets is more controversial.

In Luis’s case, a federal district court allowed the government to freeze her assets under a law that allows the government to seize property linked to alleged violations of banking or healthcare.

They could also freeze property “of an equivalent value” that could be later substituted in a future forfeiture order if she was convicted of fraud. That decision was later upheld by a federal appeals court.

But the government had also put a hold on $15 million in revenues that Luis’s companies had generated that was not related to the Medicare payments, her lawyers argued.

On Wednesday, Justice Breyer sided with that claim, writing that “until conviction, the untainted property at issue belongs to the defendant, pure and simple.”

Justice Clarence Thomas wrote in a separate opinion that he would side with Luis based on a strict textual reading of the Sixth Amendment rather than what he called Breyer’s “balancing approach.”

In dissent, Justice Anthony Kennedy said the court’s “unprecedented holding rewards criminals who hurry to spend, conceal, or launder stolen property by assuring them they may use their own funds to pay for an attorney after they have disputed the proceeds of their crimes.” His dissent was joined by Justice Samuel Alito.

In her own dissent, Justice Elena Kagan said that Luis had no right to use her assets to pay for a lawyer because the government had established probable cause that it will eventually recover the money.

“The thief who immediately dissipates his ill-gotten gains and thereby preserves his other assets is no more deserving of chosen counsel than the one who spends those two pots of money in reverse order,” she wrote. “Yet the plurality would enable only the first defendant, and not the second, to hire the lawyer he wants.”